O'Neill v FSS Trustee Corporation as Trustee of the First State Superannuation Scheme & Anor

Background

1. The Trustee was the trustee for the Scheme, which was originally established under the Crown Employees (Police Officers Death and Disability) Award 2005 ('the Award') for the benefit of serving police officers of the New South Wales Police Force ('the NSW Police'). The Trustee had established two insurance policies with Metlife in association with the Scheme: the 'Blue Ribbon Policy' and the 'FSS Group Life Policy'.
2. Mr O'Neill was a serving police officer of the NSW Police from 26 January 1989 until 11 May 2009. By 2008 he had attained the rank of sergeant. He was entitled to enjoy benefits under the Scheme. From 1990 to 1995, Mr O'Neill was posted to King Cross Police Station. During training for this posting he was made aware of the risks of the blood-borne viruses Hepatitis C and HIV. Following this education, he developed a phobia towards germs and possibly contaminated environments, and eventually developed a disabling Obsessive Compulsive Disorder ('OCD'). Mr O'Neill submitted a Workers Compensation Claim in December 2008. On 25 November 2010 the NSW Police accepted that Mr O'Neill was permanently incapacitated for work and approved his medical discharge. His last day of service was 11 May 2009.
3. On 21 February 2011 Mr O'Neill made an application to the Trustee for a total and permanent disability ('TPD') benefit under the Award. Six months later, on 22 August 2011, Mr O'Neill attended an independent medical examination with a Dr Robert Kaplan at Metlife's request. Dr Kaplan's report confirmed that Mr O'Neill suffered from OCD in the severe range and that he was indeed permanently disabled.
4. During the period August to September 2011, Metlife organised covert surveillance of Mr O'Neill, and supplied Dr Kaplan with the resultant surveillance report for his comment. Following this, Dr Kaplan issued a supplementary report dated 6 November 2011 stating that on the basis of his review of the surveillance report, Mr O'Neill was "not disabled in any capacity".
5. On 8 October 2012, the Trustee informed Mr O'Neill that it was initiating a 'Procedural Fairness' process regarding Mr O'Neill's claim. On 5 February 2013, Metlife informed the Trustee that it had decided to decline Mr O'Neill's TPD claim, stating that: "When assessed against the contradictory evidence which is confirmed and acknowledged by two medical specialists, it is clear that [Mr O'Neill] has chosen to portray himself to be disabled to [an] extent in excess of that which the evidence shows."
6. The Trustee relayed Metlife's decision to Mr O'Neill on 18 February 2013, and invited Mr O'Neill to have the claim heard by the Claims Review Committee. The Claims Review Committee consists of an independent chairman agreed by the Trustee and Metlife, together with one representative of the Trustee and one representative of Metlife. Metlife had agreed to be bound by the outcome of that contractual expert review process.
7. Mr O'Neill sought representation and proceeded to the Claims Review Committee, which heard his claim on 19 September 2013. On 22 October 2013, the Trustee advised Mr O'Neill that his TPD claims had been admitted by the Claims Review Committee.
8. On 14 November 2013, approximately 32 months since applying for his TPD benefit, Mr O'Neill received a payment of $771,022.31 from Metlife in satisfaction of the claim.
9. By Summons filed 26 May 2014, Mr O'Neil sought preliminary discovery of documents relating to his potential entitlement to relief: (1) under Insurance Contracts Act (Cth), s 57; and (2) for Metlife's alleged breach of the contractual obligation to act with the utmost good faith pursuant to either Insurance Contracts Act, s 13 or pursuant to Metlife's common law duty as an insurer.
10. As earlier indicated, the Assistant Registrar refused to make that order in a 23 September 2014 decision. Mr O'Neill now asks the Court to review and set aside the Assistant Registrar's decision pursuant to UCPR, r 49.19, and now to order Metlife to give preliminary discovery on the basis of the potential s 57 interest claim. He no longer presses for preliminary discovery related to any aspect of an alleged breach of Metlife's duty to act with the utmost good faith.

The Preliminary Discovery Sought

1. The documents Mr O'Neill seeks are identified by his summons filed 26 May 2014. The summons seeks "documents that are or have been in the Second Respondent's [Metlife's] possession and that relate to the question of whether or not the Applicant is entitled to make a claim for relief", including (without limitation): 1. "(1) The complete file held by the Second Respondent which relates to the claim by the Applicant for benefits under his Total and Permanent Disability Policy (the "TPD Policy") in respect of which the Second Respondent is the insurer; and 2. (2) All documents which relate to or in any way concern, or record or refer to the Applicant's claim under the TPD Policy, including but not limited to how the Applicant's claim was managed or assessed; 3. (3) All documents evidencing communications with the First Respondent and/or any other third party or person (including but not limited to any Re-Insurers of the Second Respondent) in relation to the Applicant's claim under the TPD Policy; 4. (4) All documents evidencing the Policy of Insurance and contractual arrangements between the Second and First Respondents."
2. It is acknowledged in submissions that the range of documents so requested goes considerably further than the documents that have passed between Metlife and the Trustee, the Trustee and Mr O'Neill, and Metlife and Mr O'Neill.

Legal background

1. The argument on Mr O'Neill's motion engages legal principle in a number of areas. At this point, a brief statement of the various legal principles that are applicable is useful.

Review of the Registrar's Prior Decision

1. This Court's power to review a decision of the registrar is found in UCPR, r 49.19, which provides as follows: "If in any proceedings a registrar gives a direction or certificate, makes an order or decision or does any other act, the court may, on application by any party, review the direction, certificate, order, decision or other act and make such order, by way of confirmation, variation, discharge or otherwise, as the court thinks fit."
2. A UCPR r 49.19 review is not an appeal and is not subject to the restrictions that apply to appeals: Tomko v Palasty (No 2) (2007) 71 NSWLR 61 ("Tomko") at [6], [10], [50], [52] per Hodgson and Basten JJA, Ipp JA agreeing at [17]. Under UCPR, r 49.19 review, the applicant does not need to demonstrate that there has been a material error in the reviewed order: In the Will of Sheppard [1972] 2 NSWLR 714; and the formal limitations against allowing fresh evidence on appeal do not apply: Hawkins v Barkley-Brown [2010] NSWSC 48. The Court has a broad discretion as to the procedure to be adopted in the review, however the fact of the Registrar's decision, especially where it relates to a matter of practice and procedure, will be a relevant consideration in the exercise of the review power: Wentworth v Graham (2002) 55 NSWLR 638 at 640-1. It is proper for the court to exhibit a natural inhibition against the unrestrained substitution of the reviewing court's views for those of the original tribunal: Westpac Banking Corp v Abemond Pty Ltd (NSWSC, Santow J, 28 October 1994, unreported, BC9403529). But a court may be expected to intervene where the applicant demonstrates error in the Registrar's decision: Tomko at [6], [10], [50], [52] per Hodgson and Basten JJA, Ipp JA agreeing at [17].
3. As earlier indicated Mr O'Neill now only presses for preliminary discovery from Metlife under UCPR, r 5.3 of information relating to its potential Insurance Contracts Act, s 57 interest claim. The Court need now only review that part of the Registrar's decision which relates to that potential claim. The Registrar's reasons for denying preliminary discovery of documents relating to the potential s 57 claim were that the material sought went to the decision-making processes of the insurer in relation to the claim, which existing authority indicates is not relevant to the assessment of an Insurance Contracts Act, s 57 claim. The Assistant Registrar who heard the matter said the following on this subject: "17. Both parties agree that that the liability to pay interest under s. 57(2) of the Act arises if it is unreasonable for the insurer to have withheld payment of the amount the insurer was liable to pay under the contract of insurance. If the Court finds that it was not unreasonable for the insurer to have withheld payment of the claim, the insurer would not be liable to pay interest under s. 57. Those propositions are based on the comments of Nicholas J in Sayseng v. Kellogg Superannuation Pty Limited and Anor [2007] NSWSC 857. The applicant then asserts that he requires preliminary discovery to review documents which relate to and concern the issue as to whether it was unreasonable for the respondent to withhold the payment of monies to the applicant. 18. In Sayseng v. Kellogg Superannuation Pty Limited and Anor [2007] NSWSC 857, Nicholas J said (at [7]): 7 In my opinion it should now be accepted that the correct approach to be taken by the court on this question is that taken by Cole, J in Bankstown Football Club. In my assessment, the cases to which I have referred establish that the question of reasonableness is to be judged by reference to the true position in respect of the claim with allowance to be made for the insurer to have a reasonable period of time within which to investigate the claim and to consider its position. The discretionary determination is to be made having regard to the particular circumstances of the case, including the probable issues which require investigation. Under the Act the court is not required to evaluate and pronounce upon the opinion or decision-making process of the insurer. It is not relevant that the insurer acted bona fide in denying the claim, or when the judgment of the court established the insurer's liability to pay it. In short, the award will be calculated on the basis of what the court finds is a reasonable time for completion of the insurer's investigation of the claim. Put another way, in my opinion, the insurer is not automatically liable to pay interest from the day on which it became liable to pay to a person an amount under a contract of insurance. Under s 57(2) liability to pay interest is to be calculated with regard to the day on which it was unreasonable for the insurer to withhold payment of the amount after it had become liable to pay it in response to a claim. (Emphasis added) 19. In my opinion, the material sought in [1] above goes to an evaluation of the decision making process itself and is not therefore relevant to the s. 57 claim.
4. The Assistant Registrar saw the matter as one for the application of principles settled in Sayseng v Kellogg Superannuation Pty Ltd [2007] NSWSC 857 ("Sayseng").

The Trustee's Obligation to Pursue Mr O'Neill's TPD Claim

1. Mr Rayment QC argued that Mr O'Neill had standing to bring these proceedings notwithstanding that the Trustee not he was the party to the policy with Metlife. Mr Rayment QC relied upon Superannuation Industry (Supervision) Act 1993 (Cth) ("SIS Act"), s 52, which provides covenants which are taken to be included in the governing rules of all registrable superannuation entities under the Act. The Trustee is such an entity. Subsection (1) states: (1) If the governing rules of a registrable superannuation entity do not contain covenants to the effect of the covenants set out in this section, those governing rules are taken to contain covenants to that effect.
2. The applicable covenants regarding insurance are found in subs (7). Paragraph (d) is relevant here: (7) The covenants referred to in subsection (1) include the following covenants by each trustee of the entity: … (d) to do everything that is reasonable to pursue an insurance claim for the benefit of a beneficiary, if the claim has a reasonable prospect of success.
3. The SIS Act required this s 52(7)(d) covenant to be contained in the rules of registrable superannuation entities since 1 July 2013. Prior to that date only general covenants were in effect, including the covenant still featured in s 52(2)(c), "to perform the trustee's duties and exercise the trustee's powers in the best interests of the beneficiaries".
4. Mr Rayment argued that Mr O'Neill could, by enforcing the statutory covenants of the Trustee, direct the Trustee to bring his potential s 57 claim against Metlife, and therefore that Mr O'Neill now had standing to seek preliminary discovery from Metlife directly.
5. This aspect of the matter was ultimately not in issue. Metlife conceded that Mr O'Neill had standing to bring a claim personally under Insurance Contracts Act s 57 as a person entitled to receive a payment under a contract of insurance. The remaining issue was the scope of the documents that were relevant on a s 57 claim and the extent therefore to which an order for preliminary discovery was justified in support of such a potential action.

The Right to Interest Where an Insurer Unreasonably Withholds Payment

1. Mr O'Neill contemplates possible action under Insurance Contracts Act s 57. When an insurer unreasonably fails to make payment under an insurance policy, an obligation to pay interest on the amount to be paid runs from the date it became unreasonable for the insurer to have withheld payment. The obligation ceases to run from the earlier of the day on which payment is actually made or posted. Insurance Contracts Act, s 57 provides in full as follows: "(1) Where an insurer is liable to pay to a person an amount under a contract of insurance or under this Act in relation to a contract of insurance, the insurer is also liable to pay interest on the amount to that person in accordance with this section. (2) The period in respect of which interest is payable is the period commencing on the day as from which it was unreasonable for the insurer to have withheld payment of the amount and ending on whichever is the earlier of the following days: (a) the day on which the payment is made; (b) the day on which the payment is sent by post to the person to whom it is payable. (3) The rate at which interest is payable in respect of a day included in the period referred to in subsection (2) is the rate applicable in respect of that day that is prescribed by, or worked out in a manner prescribed by, the regulations. (4) This section applies to the exclusion of any other law that would otherwise apply. (5) In subsection (4): law means: (a) a statutory law of the Commonwealth, a State or a Territory; or (b) a rule of common law or equity."
2. Section 57 codifies the payment of interest on insurance claims, and displaces for insurance claims any state law based regimes for the awarding of interest on judgments as it "states completely, exhaustively and conclusively the law on the subject of interest payable for periods during which a person has been kept out of insurance moneys to which he is entitled": NRMA Insurance Ltd v Tatt (1989) 92 ALR 299 at 315 per McHugh J. The section serves two purposes: the primary purpose is punitive, to secure prompt payment of claims by insurers, and the secondary purpose is compensatory: Thompson v NSW Land and Housing Corp (No 3) [2013] NSWSC 1658 at [33] per Hislop J.
3. The key to s 57 is the determination of the day from which it was unreasonable for the insurer to have withheld payment. As a determination of reasonableness is required, the Court is to assess the matter objectively, but as the question is one of fact, its answer will depend on the circumstances of each case: Fitzgerald v CBL Insurance Ltd (No 2) [2015] VSC 176 at [22] per Sloss J; Settlement Wine Co Pty Ltd v National & General Insurance Co Ltd (1994) 62 SASR 40 at 70 per Perry J.
4. The evidence that will inform the Court's decision as to the date from which it was unreasonable for the insurer to have withheld payment comprises the objective facts of the claim that the insurer had to consider. Whether the time at which the insurer actually paid the claim was delayed because it acted in good faith or bad faith or because it received poor advice, no advice or misconstrued the advice it did receive, does not matter. Such facts have been held not to be relevant to the objective determination of what time would have been reasonable for payment. Rather the task is for the Court to determine on what day a reasonable insurer would have paid out the claim.
5. Evidence of the insurer's actual decision making process and any consequent delays is not relevant to what a reasonable time to process the claim would have been. A s 57 interest claim will be determined in a context where the insurer's liability to pay the claim has either been found against the insurer or admitted. The failed or abandoned defence must then be ignored in the assessment of the date from which it was unreasonable to pay the claim, for good reasons of policy. Bongiorno J said in HIH Casualty & General Insurance Ltd (in liq) v Insurance Australia Limited (No. 2) [2006] VSC 128 ("HIH Casualty"): "Once the court has rejected the insurer's defence to a policyholder's claim, that defence becomes irrelevant as does the fact that the insurer had a bona fide belief in its efficacy. To hold otherwise would put a premium on erroneous advice. Taken to its logical extreme, an insurer which relied upon incorrect legal advice or an inadequate report of a loss adjuster to form a belief as to the possibility of its successfully defending a policyholder's claim would be advantaged by having obtained bad legal or loss adjusting advice. The successful policyholder would be correspondingly disadvantaged by the same irrelevant circumstance."
6. The correct approach to be taken when determining the reasonableness of the time taken by the insurer to make payment to the insured Nicholas J describes in Sayseng at [7]: "In my opinion it should now be accepted that the correct approach to be taken by the court on this question is that taken by Cole, J in Bankstown Football Club. In my assessment, the cases to which I have referred establish that the question of reasonableness is to be judged by reference to the true position in respect of the claim with allowance to be made for the insurer to have a reasonable period of time within which to investigate the claim and to consider its position. The discretionary determination is to be made having regard to the particular circumstances of the case, including the probable issues which require investigation. Under the Act the court is not required to evaluate and pronounce upon the opinion or decision-making process of the insurer. It is not relevant that the insurer acted bona fide in denying the claim, or when the judgment of the court established the insurer's liability to pay it. In short, the award will be calculated on the basis of what the court finds is a reasonable time for completion of the insurer's investigation of the claim. Put another way, in my opinion, the insurer is not automatically liable to pay interest from the day on which it became liable to pay to a person an amount under a contract of insurance. Under s 57(2) liability to pay interest is to be calculated with regard to the day on which it was unreasonable for the insurer to withhold payment of the amount after it had become liable to pay it in response to a claim."
7. A similar position had been taken in New South Wales in Max Hams Pty Limited v CGU Insurance Ltd [2002] NSWSC 843 at [27] by Einstein J.
8. Nicholas J relied upon the decision of Bongiorno J in HIH Casualty which rejected a submission that the s 57 determination depends upon any concept of a bona fide dispute between insurer and insured. Bongiorno J observed (at [10]) that Ormiston J's reasoning in VL Credits Pty Ltd v Switzerland General Insurance Co Ltd [1991] 2 VR 311 ("V.L. Credits") also supported the view that evidence of internal decision making is not relevant to the determination. In a concise summary of Ormiston J's reasoning in V.L.Credits which I gratefully adopt. Bongiorno J said the following: "Ormiston J in V.L. Credits v Switzerland General Insurance assessed interest on the same principle; that is to say he allowed the insurer a reasonable time to investigate the claim and determined the date from which interest ran as being at the end of that time. His Honour appears to have selected a period of three months in a case involving arson as being a reasonable period during which the insurer was entitled to investigate the claim. He awarded interest after that period. His judgment does not suggest that that assessment was made on the basis of evidence as to what the insurer knew and what it did. Rather, it appears to have been selected by his Honour as being a reasonable period taking into account the type of case and the probable issues which had to be investigated."
9. These authorities have been more recently applied in Victoria. Sloss J in Fitzgerald v CBL Insurance Ltd [2014] VSC 493 ("Fitzgerald") at [415] last year reaffirmed that the internal decision-making of the insurer is not relevant to the s 57(2) determination of the reasonable time for payment of a claim: "The question of when it became "unreasonable for the insurer to have withheld payment" under the policy is to be determined by reference to the true position as found by the court. Further, it seems clear that what the insurer did internally by way of investigating the claim, and what views it held bona fide or otherwise as to the merits of the claim, are not relevant to the court's enquiry under s 57."

Preliminary Discovery

1. Mr O'Neill seeks the exercise of the Court's power to order a prospective defendant to give preliminary discovery. This power is regulated by UCPR, r 5.3, which provides as follows: "(1) If it appears to the court that: (a) the applicant may be entitled to make a claim for relief from the court against a person (the prospective defendant) but, having made reasonable inquiries, is unable to obtain sufficient information to decide whether or not to commence proceedings against the prospective defendant, and (b) the prospective defendant may have or have had possession of a document or thing that can assist in determining whether or not the applicant is entitled to make such a claim for relief, and (c) inspection of such a document would assist the applicant to make the decision concerned, the court may order that the prospective defendant must give discovery to the applicant of all documents that are or have been in the person's possession and that relate to the question of whether or not the applicant is entitled to make a claim for relief. (2) An order under this rule with respect to any document held by a corporation may be addressed to any officer or former officer of the corporation. (3) Unless the court orders otherwise, an application for an order under this rule: (a) must be supported by an affidavit stating the facts on which the applicant relies and specifying the kinds of documents in respect of which the order is sought, and (b) must, together with a copy of the supporting affidavit, be served personally on the person to whom it is addressed. (4) This rule applies, with any necessary modification, where the applicant, being a party to proceedings, wishes to decide whether or not to claim or cross-claim against a person who is not a party to the proceedings."
2. In Hatfield v TCN Channel 9 Pty Ltd (2010) 77 NSWLR 506 at [47] - [52] McColl JA set out the key principles relevant to an application for preliminary discovery under r 5.3 as follows: "[47] First, "[i]n order for it to 'appear' to the Court that the applicant 'may be entitled' to make a claim for relief, it is not necessary for the applicant to show a prima facie or pleadable case". [48] Secondly, while "the mere assertion of a case is insufficient … [i]t will be sufficient if there is reasonable cause to believe that the applicant may have a right of action against the respondent resting on some recognised legal ground". [49] Thirdly, "belief requires more than mere assertion and more than suspicion or conjecture. [It] is an inclination of the mind towards assenting to, rather than rejecting a proposition. Thus it is not sufficient to point to a mere possibility. The evidence must incline the mind towards the matter or fact in question. If there is no reasonable cause to believe that one of the necessary elements of a potential cause of action exists, that would dispose of the application insofar as it is based on that cause of action". The use of the word "may" indicates the court does not have to reach "a firm view that there is a right to relief". [50] Fourthly, the requirement that the matters set out in r 5.3 of the Uniform Civil Procedure Rules "appear[s]" to the court to establish an entitlement to an order under the rule may be wider than the requirement in the Federal Court Rules, O 15A, r 6 that there "is reasonable cause to believe". Nevertheless Hely J's statement in St George Bank remains apposite, namely that "whilst uncertainty as to only one element of a cause of action might be compatible with the 'reasonable cause to believe' required by subpara (a), uncertainty as to a number of such elements may be sufficient to undermine the reasonableness of the cause to believe". [51] Fifthly, "the question posed by [r 5.3(1)(a)] … is not whether the applicant has sufficient information to decide if a cause of action is available against the prospective respondent [but] … whether the applicant has sufficient information to make a decision whether to commence proceedings in the court. Accordingly, an applicant for preliminary discovery may be entitled to discovery in order to determine what defences are available to the respondent and the possible strength of those defences". Thus application of the rule will not be precluded by the fact that the applicant already has available evidence establishing a prima facie case for the granting of relief, as there might be matters of defence which could defeat a prima facie case. [52] Sixthly, as Hely J said in St George Bank, "the rule is to be beneficially construed, given the fullest scope that its language will reasonably allow, with the proper brake on any excesses lying in the discretion of the court, exercised in the particular circumstances of each case"." (Citations omitted).
3. The purpose of r 5.3 is not merely to enable an applicant to determine whether a cause of action is available. As Hely J explained in St George Bank Ltd v Rabo Australia Ltd (2004) 211 ALR 147 at 26, "The question is whether the applicant has sufficient information to make a decision whether to commence proceedings in the Court. Accordingly, an applicant for preliminary discovery may be entitled to discovery in order to determine what defences are available to the respondent and the possible strength of those defences, or to determine the extent of the respondent's breach and the likely quantum of any damages award.
4. Relevantly here, it is said for example that evidence which goes to establishing the date at which it may have become unreasonable for Metlife not to pay Mr O'Neill's claim will assist Mr O'Neill in determining the quantum of interest which Metlife is liable to pay under s 57. Strictly speaking no substantive defence exists to a s 57 claim (as a payment is either made on a date before which payment was unreasonably delayed or it is unreasonably delayed). But Metlife in theory at least might still be ordered to discover any evidence relevant to when Mr O'Neill's claim should reasonably have been paid, so that the probable quantum of interest could be estimated. The test really goes to whether the information will inform the applicant whether it is worthwhile to bring the contemplated proceedings.

The Issues Raised

1. The provisions of UCPR, r 5.3(1)(a), (b), and (c) can for convenience be broken down into five elements that need to be established before the Court can order Metlife to give preliminary discovery to Mr O'Neill. Then, whether or not an order is made is still a matter within the Court's discretion: "the Court may order". The five elements are as follows: 1. Whether Mr O'Neill may be entitled to make a claim for s 57 relief against Metlife; 2. Whether Mr O'Neill has made reasonable inquiries to obtain sufficient information to decide whether or not to commence proceedings against Metlife; 3. If so, whether Mr O'Neill is unable to obtain sufficient information to decide whether or not to commence proceedings against Metlife; 4. Whether Metlife may have or have had possession of a document or thing that can assist in determining whether or not Mr O'Neill is entitled to make such a claim for relief, and 5. Whether inspection of such a document would assist Mr O'Neill to make the decision concerned.

Element (1) - Entitlement to Claim

1. Metlife has all but conceded element (1). Metlife wrote to Mr O'Neill's solicitor on 27 June 2014 stating that Metlife accepted that in the circumstances s 57 interest may be payable. But in this letter Metlife restricted the date from which such interest should be calculated to be from 5 February 2013 up to the date of payment to the Trustee on 23 September 2013. The interest on the sum paid of $700,397.00 would, if that period were accepted, be $32,136.71. But the parties have not agreed the date from which interest should begin to run, apparently because Mr O'Neill contends that preliminary discovery of evidence in Metlife's possession is necessary before that date can be determined. Rule 5.3 requires that it appears to the Court that a party 'may be' entitled to a claim, which indicates a lower threshold than that which would apply at a contested hearing. Metlife's correspondence is some basis for the Court to infer that Mr O'Neill may be entitled to a s 57 claim.
2. And the Court is satisfied that Mr O'Neill has standing to found an entitlement to s 57 interest. Mr O'Neill is not a party to the insurance contracts made between the Trustee and Metlife, but he was entitled as a beneficiary of the Scheme established by the Trustee to be paid an amount under a contract of insurance. Indeed, Metlife has paid Mr O'Neill an amount pursuant to that entitlement. Authority supports the proposition that a third party claimant may come within the literal meaning of s 57(1) as 'a person' entitled to payment 'under a contract of insurance' as an assignee of the insured's right to indemnity, despite not enjoying privity of contract with the insurer: QBE Insurance Ltd v Nguyen (2008) 100 SASR 560 ("Nguyen") at [160]-[171]. Metlife conceded on the basis of Nguyen, that Mr O'Neill had standing to bring a claim for s 57 interest without relying upon the Trustee's duties under SIS Act, s 52.
3. Three of the remaining elements numbered (3), (4) and (5) above, really hinge on whether the documents of which Mr O'Neill seeks preliminary discovery would assist him to decide whether or not to commence proceedings against Metlife. That requires a consideration of the evidence this Court would take into account when determining a s 57 claim, and whether the documents sought evidencing Metlife's internal decision-making process, such as the file that Metlife holds in relation to Mr O'Neill, have evidentiary value.
4. Even if, contrary to Metlife's argument, the documents sought are necessary for Mr O'Neill to decide whether to bring a s 57 claim, Metlife still puts at issue whether Mr O'Neill has fulfilled element (2). Metlife says he has not established he has made reasonable inquiries to obtain sufficient information to decide whether to bring a claim.
5. These reason will first consider the submissions in relation to element (2) followed by the submissions in relation to elements (3), (4) and (5).

Element (2) - Has Mr O'Neill made reasonable inquiries?

1. Metlife contends that Mr O'Neill has not made reasonable inquiries to obtain sufficient information so that he may decide whether or not to commence s 57 proceedings against Metlife. This issue can be resolved in Mr O'Neill's favour on the existing correspondence.
2. On 23 December 2013 Mr O'Neill's solicitor wrote to Metlife, referring to his claimed cause of action against Metlife under the SIS Act (and including for Insurance Contacts Act, s 57 interest) and requesting the whole of MetLife's claim file in relation to Mr O'Neill. Metlife noted that the SIS Act claim was untenable. Later, on 27 June 2014 Metlife wrote to Mr O'Neill's solicitor, stating in part: "It is our view that a potential cause of action against Metlife needs to be articulated before any preliminary discovery can be taken further. … If your client's cause of action is in respect of s 57 interest under the Insurance Contracts Act 1984 (Cth) (the IC Act), Metlife accepts that in the circumstances specific to this particular case, interest may be payable from the date of its decline on 5 February 2013 to the date Metlife dispatched the payment of the benefit to the Trustee on 23 September 2013. The interest on the sum insured of $700,397.00 for the period of approximately 8 months is $32,136.71. Please confirm whether your client's potential cause of action is for interest pursuant to s57. … The only inquiry made to MetLife in this matter to date is in the letter dated 23 December 2013 from your firm to MetLife, in which you referred to the applicant's misconceived alleged cause of action under the SIS Act, and requested the whole of MetLife's claim file in relation to Mr O'Neill. With respect, this is not a reasonable inquiry. It is, as stated by the Trustee in its letter to your firm dated 10 January 2014, a fishing expedition. .. We invite you in the circumstances to respond with a specific request for documents, going to a specific cause of action on which the applicant intends to rely, which request will be considered by our client."
3. In response to that letter, Mr O'Neill's solicitor wrote on 3 July 2014 clarifying that Mr O'Neill sought preliminary discovery to ascertain whether he had (inter alia) a claim for s 57 interest, and asking that MetLife formally concede that interest would be owed and consent to giving preliminary discovery.
4. From the correspondence it is clear that Mr O'Neill has not asked Metlife for an explanation for Metlife's delay in relation to a possible s 57 claim. But Mr O'Neill made a request for the whole of his claim file from Metlife. It is reasonable to infer in these circumstances that if Mr O'Neill did directly ask for an explanation for Metlife's delay that Metlife would not have provided him with the file it now seeks. Metlife has made it clear that it did not consider the request for its whole file to be a reasonable inquiry. Other than Metlife, there is no other source for the information that Mr O'Neill seeks to which Mr O'Neill could make enquiries.
5. The Court would not deny Mr O'Neill an entitlement to preliminary discovery here merely because he has not directly asked for an explanation for the delay in payment from Metlife. Given Metlife's responses to the correspondence of Mr O'Neill's solicitors, and its opposition to Mr O'Neill's present application for preliminary discovery on the grounds of relevance, it is clear that any further attempts by Mr O'Neill to derive the information requested from Metlife would probably be met with a denial of information. In the circumstances therefore the actions that Mr O'Neill has established that he has already taken, through his solicitors, constitute reasonable enquiries to obtain sufficient information for the purposes of r 5.3.

Elements (3), (4) and (5) - Documents to Assist Deciding on a s 57 Claim?

1. Mr Rayment QC, counsel for Mr O'Neill, argued that preliminary discovery of documents was necessary because the authorities indicate that a Court may consider a range of time periods reasonable for the payment of a claim depending on the individual circumstances of a case, and that without further evidence the date to be determined would remain a 'moveable feast'.
2. In his affidavit dated 22 May 2014, Mr O'Neill sets out the types of information which he anticipates discovery of the Trustee's ('FSS') and Metlife's files would disclose. Mr O'Neill's case is that such information is relevant to the question of whether Metlife unreasonably delayed its consideration of Mr O'Neill's claim. But some of the matters may go to other alleged breaches of Metlife's duties, which Mr O'Neill now no longer presses. The types of information Mr O'Neill say that he seeks are as follows: "i. The procedure(s) under which my claim was processed, including the timing of the steps taken by both FSS and MetLife at each stage of the process; ii. The timing of the making of arrangements for medical examinations on behalf of FSS and MetLife (such as Dr Kaplan); iii. The timing of the receipt by FSS and/or MetLife of the doctors' and other reports commissioned by them (as compared with the time when I was advised that such reports had been received); iv. To whom, within FSS or MetLife, were the reports commissioned from and sent for consideration and when that occurred, and how long it took for that process to occur; v. What occurred in respect of the processing of my claim following the receipt of Dr Kaplan's report, the AHC Investigations Surveillance Report, the supplementary report of Dr Kaplan, and later following my response to FSS in relation to Procedural Fairness; vi. Who, within FSS or MetLife, were privy to the numerous telephone calls made by me requesting updates and complaining about delays, which calls also described the psychological duress that the delays were causing me; vii. What steps, if any, were taken to address these issues, either by way of attempting to speed up the determination of my claim or otherwise addressing my difficulties, and when such steps, if any, were taken; viii. What steps were taken, either purely administratively or in meetings of persons entrusted with the task of considering or administering such claims, to determine my claim, and the timing of such steps and/or meetings; ix. Whether or not there exists any documentation which contradicted the material provided by me (or my reporting doctors) as to my medical condition and disability for work, and if such documents existed, when they were received; and x. Whether or not there existed any materials or documentation which provided any justification for the delays in determining my claim or which could constitute a defence to any claim which I might make against FSS or MetLife that their duties were not being discharged with due despatch, or that they had failed to exercise their discretion in the face of overwhelming evidence and with the required level of skill, care and diligence."
3. Mr O'Neill says that all this enumerated information is needed to decide whether to bring s 57 proceedings.
4. In response Mr Duncan of counsel for Metlife argued that in the case of a fully litigated insurance claim, a court would not consider the materials of which Mr O'Neill now seeks preliminary discovery and that the application should be refused on that basis. Mr Duncan submits that where an insured sues an insurer for failure to pay a claim, the court will consider objective evidence in a hearing regarding whether the claim ought to have been paid, including whether there have been breaches of the duty of good faith and fair dealing and the duty to act reasonably in informing or declining to form the opinion. That principal hearing, in accordance with the Court of Appeal's decision in Hannover Life Re of Australasia Ltd v Sayseng [2005] NSWCA 214, would be decided on the evidentiary basis of the objective material that has been disclosed by the insurer to the insured in the procedural fairness process necessitated by the insurer's obligation of good faith and fair dealing. It would therefore not, in the usual case, require discovery. Mr Duncan argues that it would be extraordinary if, after such a principal proceeding, the s 57 question required the reopening of evidence in the proceeding to include material that was not relevant to and not part of the principal proceedings. Mr Duncan argued that were Mr O'Neill's application here to be upheld it would change the entire course of practice in s 57 interest proceedings and would increase the potential costs of such proceedings beyond the scope of the costs usually expended in the principal proceedings.
5. Mr O'Neill's representatives have already been given informal discovery of the Trustee's file in relation to his TPD claim. This was provided as part of the consensus by which it was agreed that Mr O'Neill would not bring a claim against the Trustee. Mr John Cox, Mr O'Neill's solicitor, has noted that in previous applications for other clients where he has viewed the respective files of the Trustee and the insurer, some of the documents in the respective files have been different. For example, an insurer may hold documents outlining strategies for the processing and managing of the claim, outlining opinions and reasons for decisions regarding the collection of medical and other evidence, and setting out the reasons why claims are accepted or declined. An insurer's file may also contain correspondence between the insurer and third parties, for example, correspondence with reinsurers advising the insurer in respect of strategies and recommendations on claims.
6. Metlife argued that Mr O'Neill already possesses sufficient information to decide whether or not to commence proceedings against Metlife, evidence of Metlife's internal decision making process is not relevant to Mr O'Neill's success under s 57. Metlife notes that the information already available to Mr O'Neill already includes: the Trustee's file relating to the claim, as mentioned above; two medical reports commissioned by Metlife; a surveillance report and the raw surveillance footage commissioned by Metlife; all of the correspondence that had flowed between Mr O'Neill and the Trustee, Mr O'Neill and Metlife and the Trustee and Metlife, and any other materials necessarily required to be produced by Metlife in order to meet its procedural fairness obligations. Mr Duncan argued that if Mr O'Neill was granted preliminary discovery in this matter, despite already holding what he described as a 'plenary' amount of information regarding his claim, the precedential effect would be that an insurer's claim file would be available by r 5.3 as a matter of course to every insured in every matter.

Consideration

1. Metlife's arguments are the more persuasive. It is difficult to see how many of the material which Mr O'Neill seeks will assist him in determining whether he is entitled to make a claim for relief under s 57. This is principally because he is unlikely to be able to use any of this material either to advance the claim for s 57 relief or to comprehend the probable quantum of the claim. When the Court comes to determining the claim Sayseng, HIH Casualty, V.L. Credits and Fitzgerald are all authorities for the proposition that the Court would not examine Metlife's actual decision making processes. Metlife's file, documents relating to the management or assessment of the applications claim and communications with the Trustee and third parties (to the extent they are not already in Mr O'Neill's possession from the Trustee) and contractual arrangements between Metlife and the Trustee, as are requested in the Summons, could only go to an issue of Metlife's process of actual consideration of this claim. Prima facie this is an impermissible area of enquiry on a s 57 claim and Metlife would be justified on such a contested claim in submitting to a Court that such documents should not be taken into account.
2. Mr O'Neill's s 57 claim will not be a contest about Metlife's own decision-making processes. It will be a contest about how long a reasonable insurer in Metlife's position would have taken to process Metlife's claim. This kind of assessment cuts through any deficiencies in Metlife's own internal decision-making processes and allows the Court to look at the issue objectively. And there is substantial material for Mr O'Neill, or any expert engaged by him, to advance the case that the date by which it was unreasonable for Metlife not to have paid the claim was a date before the date that Metlife apparently concedes payment should have been made, 5 February 2013. Mr O'Neill has the principal documents in the chronology from when he first applied to the Trustee for a TPD benefit in February 2011 through until Metlife declined to indemnify him in February 2013. The Trustee's files should sufficiently indicate to Mr O'Neill what Metlife was given, the full nature of the claim presented to it and the timing of the principal communications. This is all that is necessary to provide the platform to decide Mr O'Neill's s 57 claim.
3. Nor do the matters raised in Mr O'Neill's affidavit of 22 May 2014 take the matter any further. They are really just an elaboration of the matters sought in the Summons, going as they do to the detail of arrangements for medical examinations, receipt of medical reports, internal administrative processes and material justifying the time Metlife took to process the claim. Mr O'Neill's affidavit also suggests that Metlife should produce material recording his own telephone calls to complain about delays. But he must already be aware of that information, even if it could otherwise be shown to be relevant.

Conclusion and Orders

1. In the circumstances therefore the issue of the exercise of the Court's discretion under UCPR, r 5.3 does not arise because the basis for the exercise of that discretion has not been made out. In my view the plaintiff's motion should be dismissed and the Registrar's decision upheld.
2. The Court's orders therefore will be: 1. Mr O'Neill's motion under UCPR, r 49.19 is dismissed; 2. I affirm the Registrar's decision on 23 September 2014; 3. The Summons is dismissed; 4. Order the plaintiff to pay the second defendant's costs of these proceedings.

Amendments 31 August 2015 - typographical errors in [57], [58] of judgment. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 31 August 2015